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$30 Billion Pension Surplus Fight Continues?
Amy Minsky of Postmedia News reports in the Ottawa Citizen, Top court OKs appeal in PS unions' $30B pension fight:
Federal
unions and retiree groups will continue their decade-long legal fight
to get $30 billion of their pension plan fund back from the government.
The
Supreme Court of Canada decided Thursday that the plaintiffs had legal
grounds to appeal a 2007 decision that said 700,000 public servants,
military and RCMP personnel were not entitled to any of the $30-billion
surplus in their pension plans.
The
surplus has been at the centre of a historic legal battle for more than
a decade, which began shortly after the Chrétien government used the
surplus in 1999 to help offset the deficit.
"It was a money
grab," said Patty Ducharme, national executive vice-president with the
Public Service Alliance of Canada, one of 18 unions involved in the
battle. "The federal government has a responsibility to its employees,
to the plan members; but they just took that money out of the plan and
stole it."
The Ontario Superior Court of Justice in 2007 ruled
against unions, which had filed a claim in 1999 to force the government
to return the $30-billion surplus to the plan.
The plaintiffs also lost their appeal.
Pensions
continue to be at the tops of many baby boomers' minds, as thousands
prepare to retire from the public service over the next several years.This battle began months after Parliament passed Bill C-78, amending the law governing public service retirement benefits.
The
revision gave government permission to use surpluses from its
employees' pension funds and either spend the money or transfer it to
the general government coffers.
Before the legislation was
amended, the Treasury Board had no legal authority to relocate or
redistribute the surplus, according to the Public Service Alliance of
Canada.
So even though government abided by its laws when it used
the surplus to offset the deficit, Ducharme said the government's
actions were "immoral and unethical," and that the money was "stolen"
from public servants.
The Ontario court rejected the claims, and
instead accepted the government's argument that the $30 billion at the
centre of the dispute was not a surplus, but rather an accounting device
used to monitor government liabilities.
A spokesman with the
Treasury Board said the government could not comment on the case since
it is before the courts, but assured public servants they would continue
receiving their benefits.
Shortly
after the government appropriated the pension surplus, it increased the
amount its employees were required to pay into the fund - something
Ducharme said is backwards and unfair.
"If they had done one or the other, it probably wouldn't have been quite as offensive.
"But
they did," she said. "If there's money enough to take $30 billion out
of the fund, but then you crank up the amount the employees have to
pay, somehow it just doesn't seem right.
"You're getting it from both directions."
The National Union of Public and General Employees released this statement:
The
Supreme Court of Canada has granted the Public Service Alliance of
Canada (PSAC) application for leave to appeal a longstanding pension
case.
In October 2010 the Ontario Court of Appeal dismissed PSAC's
case against the federal government for expropriating $28 billion from
the federal superannuation fund.
At issue is the fact that the
federal government raided a $28 billion surplus from the public
service, RCMP and Canadian Forces pension plans after passing
legislation that restructured the way the plans are managed.
PSAC
claims that the government breached the trust of plan members,
violating its fiduciary duty and not meeting its obligations.
In
addition, PSAC maintains that the removal of $28 billion in pension
contributions, impacting 700,000 employees, is a matter of national
importance.
The union believes that the trial judge incorrectly
concluded that the Superannuation Accounts had not accrued assets. The
evidence clearly demonstrated that the government was required to and
did put aside real funds to deal with its pension obligations, along
with funds collected from plan members' contributions.
PSAC also
disagreed with the trial judge's conclusion that the government had no
fiduciary obligation toward plan members and toward their interest in
the surplus. The evidence presented in the case established that this
was true.
The Court of Appeal found that the federal government
did have the discretion to remove the surplus funds, even if it
resulted in higher pension contributions for plan members. PSAC
believes that the government must be held to account for its actions
and that the funds should be restored to the pension fund.
This is an interesting case. The big issue is who does the pension
surplus belong to, the plan sponsor (Government of Canada) or the
employees represented by the unions? Some argue that investment gains
should belong to the plan sponsor because it allows them to lower the
cost of funding the pension and in the case of a shortfall, they're on
the hook for topping up the pension plan. Others argue that pension
surpluses belong to employees because without their contributions, these
surpluses wouldn't exist.
I think there is a case to be made on both sides but
using pension surpluses to pay down deficits and then increasing the
contribution rate is a low blow. I can understand why the unions are
fighting this case hard. Hopefully, it won't take another decade to
resolve it.
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The US uses the same bullshit accounting mechanisms. They count an entitlements future liability as a current cash payment.
The is what the US debt consists of.
Each completely imaginary.
http://www.fms.treas.gov/frsummary/frsummary2010.pdf
Isn't the entire premise of a pension fund that during good times the investments lead to a surplus to make up for the inevitable years where returns are less than expected? ughhhh...
The beast is always hungry
sticking it to the man
.
but sir you are the man
In a situation where these pensions were underfunded (instead of surplus) who would be responsible for making up the shortfall?
Contractually, the plan sponsor would have to make up the shortfall. I edited my comment, thanks.
Where would the plan sponsor aka government get the money? The taxpayers. The plan sponsor doesn't have billions sitting in the bank to cover shortfalls.
Today's surplus is tomorrow's shortfall. Money is fungible, does it matter if the gov/sponsor side is over or under funded?
More importantly- would adding the 30B back to the fund increase distributions to retirees? That BS maneuver didn't work out too well for the California public pensions in the US.
If the 30B would increase payouts, are the Canadian taxpayers polite enough to foot the bill down the road when the folly is exposed, or will they just cut the geezes' benefits (either nominally or through inflation)?
If the legal battle has been going on for ten years and the assets belong to a defined benefit plan sponsored by a sovereign government I am suspicious that the debate might be about more than just paper "ownership."